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Germany is the top European investor in India. The governments of India and Germany have created a favourable environment for investors from both the countries. There has been a constant growth in bilateral trade between India and Germany; this has been due to growing mutual business activities in various sectors.
Sectors that attracted maximum FDI equity inflows from Germany
Some of the leading automobile companies in India are based in Germany. German companies have created a very prominent position in Indian markets. Apart from automobile, German companies like DHL has reformed the Indian delivery services.
Leading German companies in India
Indian companies are major investors in Germany. They have invested more than EUR 7 billion in Germany. There are more than 200 Indian companies operating in Germany currently.
Leading Indian Companies in Germany
India’s ranked at 63rd position in 2020. The country’s ranking on the World Bank’s Doing Business Report (DBR) of 190 countries, has improved from 142nd position in 2014 to 63rd position. It has earned a place among the world’s top 10 improvers for the third year in a row.
Trade across Borders: India has simplified starting a business by incorporating electronic memorandum of association and articles of association. India currently ranks as a substantial nation for cross border trade and business investment by the World Bank Cross border trading has now been simplified with the start of post-clearance audits, upgrading port infrastructures, and enhancing the electronic submission of documents.
Custom Clearances: The Central board for excise in customs (CBEC) has simplified Indian customs single window project to facilitate trade. This enables one step submission of custom clear documents on an online portal. Only three mandatory documents are required for customs purposes. Computerized transactions have reduced risks and created a simplified system wherein, chances of inspections have been reduced.
Infrastructure Development: There has been an increase in infrastructure development projects due to reduction in the time and cost of obtaining construction permits. Various municipal corporations in metro cities of India have developed a fast-track approval permit for building projects. Cost of obtaining construction permits has reduced from 23.2% to 5.4% of the economies per capita. These provisions were enabled to ease the process of doing business in India and reaching out to investors around the globe.
Resolving Insolvency: Issues like resolving insolvency have been made easier by promoting reorganization proceedings in practice. As a part of Ease of Doing Business in India, the country has strengthened access to credit by amending its insolvency law. Secured creditors are now given absolute priority over other claims within insolvency proceedings.
As a part of ease of doing business in India, the country has strengthened minority investor protections by increasing the remedies available in cases of prejudicial transactions between interested parties. India made enforcing contracts easier by introducing the National Judicial Data Grid, which makes it possible to generate case measurement reports on local courts.
Paying Taxes: To promote ease of doing business, India made paying taxes easier by replacing many indirect taxes with a single indirect tax, the GST, for the entire country. India also made paying taxes less costly by reducing the corporate income tax rate and the employees’ provident funds scheme rate paid by the employer.
The Employee State Insurance Corporation (ESIC) has developed a fully online return filing with online payment. Due to the introduction of e-verification system, there is no physical touch point for document submission with the income tax authorities.
Business Reform Action Plan (BRAP) 2019 – 372 new action plans were introduced under the BRAP 2019. It included new sectors such as Healthcare and Hospitality, Central Inspection system, Trade License, Registration under Legal Metrology, and Registration of Partnership Firms & Societies. This reform includes the future plans and growth of previous plans by the states and union territories in India.
The Government of India has worked on creating a conducive environment by streamlining the existing regulations and eliminating unnecessary requirements and procedures to help businesses grow. The focus is on reduction in compliance burden by using technology, third party assessments, and faceless human intervention.
Fast Track System: The Indian Department for Promotion of Industry and Internal Trade (DPIIT) has started a fast track system for German companies operating in India. India also runs the Make in India Mittelstand in Germany. Make in India is a major national programme of the Government of India that aims to create business set ups in India. Mittelstand companies are the backbone of the German industry and its economy and thus the Make in India platform has moved forward to open doors for these companies. There is a good potential for mobilizing their entry into the Indian market as their exposure to India remains limited. Currently, 135 German companies are operating with the help of this program.
Sister State Agreements: A sister city is a form of agreement that incorporates the idea inter community agreements between two cities in different countries. The two cities then conduct actions related to municipal, business, trade, educational, and cultural purposes together with mutual understanding.
The sister state agreement between India and Germany is a way to promote and improve commercial and academic opportunities between the two nations. These twin city agreements aim to improve the urban projects in Indian cities. This agreement plays a major role in formulating the relationship of an Indian city and the city of the nation we have an agreement with. India and Germany sees this agreement as a gateway to mutual development and transfer of technology and assets.
On-going Agreements on trade and business between India and Germany
World Trade Organization - Dispute settlement body
The World Trade Organization is the only international governing body that decides the rules of trade. There are various WTO agreements signed by hundreds of nations, which form the process of trade between those nations. They aim to ensure a smooth flow of trade and provide free trade possibilities. WTO has a dispute settlement body that ensures if any trade related disputes arise, they are dealt within the organization and a free flow continues. The Dispute Settlement Body (DSB) acts as a general council for disputes settlement for its member countries. India is a leading signatory of DSB and has resolved various minor and major disputes through the DSB.
1. India’s Science and Technology Cooperation: India has a cooperation agreement with 83 countries. Germany is a prominent member of the S&T cooperation states. This agreement aims to increase India’s scientific reach in global states and enhance the status of IT industry.
Mandates of the S &T Policy
2. Inter-Governmental Consultations (IGC): The fifth round of inter-governmental consultations focused primarily on the application of Artificial Intelligence. The discussion focused on various possibilities of joint ventures that can open possibilities by the use AI in various IT sectors. Both the nations exchanged valuable expertise and came into agreements that can start an advanced tech system between the two nations.
Double Taxation Avoidance between India and Germany
The agreement covers tax residents of Germany and India. It covers income tax earned by the residents of both the nations. The agreement does not apply to shell companies, the shell companies are mere non-operating bodies with no real or contentious business activity records. Any Germany based company that has a permanent establishment in India; the profit attributable to the permanent establishment will be taxed only in India. And the same process will apply to any Indian company established in Germany.
Article 25 of DTAA includes MAP rules. It focuses on the various procedures that need to be followed in order for the companies to avail the benefits of DTAA. These rules were amended recently, this opened gates for various MSMEs companies to enter into the global market due the simplified nature.
India & Germany have a strong export import relation based on trusted partnership and bilateral agreements. This relation has been established over the past years of constant interface and development of trade methods.
Germany India – Top Sectors of Export Import
Various leading Indian banks have branches in Germany to facilitate NRI transactions and help business established overseas
Indian Banks in Germany
https://mea.gov.in/Portal/ForeignRelation/Germany2020f.pdf
https://mea.gov.in/Portal/ForeignRelation/Bilaterla_Brief_updated_Germany_Dec_12__2018.pdf
https://dipp.gov.in/sites/default/files/FDI_Factsheet_March%2C21.pdf
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